AllianceBernstein's foreign flight takes hold in '06

Asset-manager's focus on foreign mutual-funds, hedge-funds scores big

By

MurrayColeman

SAN FRANCISCO (MarketWatch) - AllianceBernstein Holding LP
AB, +0.36%
reported Wednesday its profits jumped a record 45.1% in the fourth quarter, aided by $10.6 billion in net inflows and a 23.9% boost in assets under management.

The asset manager's net income rose to $129.4 million, or $1.48 per unit, up from $85.8 million, or $1.02 per unit, for the same period a year ago.

Thomson First Call's consensus of analysts tracking the publicly traded partnership was $1.16 per unit.

"Performance fees were a significant contributor," Lewis Sanders, AllianceBernstein's chief executive, said in a conference call after markets closed.

"Our hedge-fund performance was spectacular. We're seeing very strong growth in the AUM (assets under management) in hedge funds."

He added that investors shifted more into equities, especially international stock funds, and alternative investment products in the quarter. Those types of products typically charge higher fees than fixed-income funds. AllianceBernstein manages and distributes mutual-funds, hedge-funds and a variety of private account lines.

Total fees charged by the firm grew 34.1% to $895 million in the fourth quarter from the same period a year earlier. Performance-based fees, commonly used in hedge-funds and similar products, jumped 87.7% to $173 million. AllianceBernstein's broader mix of mutual-funds and private accounts finished at $722 million, up 25.5%.

Gerald Lieberman, AllianceBernstein's chief operating officer, pointed to the asset manager's bond funds as well as its value and international stock funds as outperformers compared to peers in 2006. But he added that performance in the firm's stock growth funds lagged the market.

The firm's assets under management rose to $716.9 billion from market appreciation and growing demand from its institutional clients.

"Our firm's business continues to increasingly become more global," Lieberman said. "Over the past 12 months, our assets in global and international services grew by 50% in the full-year."

AllianceBernstein also warned settlement of a class-action suit might result in a 15 cents per unit one-time charge. That could result in a restatement of its fourth-quarter earnings, company officials said.

The suit was apparently caused by a clerical error in processing a holding in an AllianceBernstein portfolio, noted Jeffrey Ptak, a Morningstar Inc.
MORN, -1.25%
analyst.

"They indicated that residual settlement proceeds and insurance should cover those costs," he said. "It doesn't sound like from a cash-flow or an accounting standpoint it's going to be anything that will move the needle much."

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